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The latest Commitments of Traders forex positioning report from the CFTC shows that almost all of the U.S. dollar’s forex rivals were pushing back. Moreover, calculations from Reuters show that the value of net long positions on the Greenback dropped further to $18.97 billion from $20.89 billion last week, which is its lowest level since July 2014.

Keep in mind that these numbers show the net positioning of non-commercial traders against the U.S. dollar. If you’re feeling overwhelmed by all these figures, you might need to review our School of Pipsology lesson on How to Gauge Market Sentiment Using the COT Report in order to learn how to pinpoint potential forex market reversals.

CFTC COT Forex Positioning (Oct. 13, 2015)
CFTC COT Forex Positioning (Oct. 13, 2015)

Lemme break down the latest numbers for y’all:

  • The Kiwi finally ended the Greenback’s domination, thanks largely to the reduction in the number of short contracts on the Kiwi from the previous week’s 19,328 to just 17,652 for the week ending October 13.
  • The U.S. dollar lost some ground against all its forex rivals, with the exception of the pound.
  • Forex traders increased their net bearish bias on the pound, reducing their bullish bets from 47,700 contracts to 44,765. This is now the third consecutive week of increasing bearish bias on the pound.
  • Non-commercial forex traders trimmed their short bets while simultaneously increasing the number of bullish bets on the euro, which allowed the euro to post the largest net absolute change in positioning.
  • After losing out to the U.S. dollar three weeks ago, the Swissy looks ready to mount a challenge against the Greenback again since large speculators reduced their short bets on the Swissy from 16,376 to 13,215.

As I mentioned in last week’s write-up, forex traders, especially interest rate junkies, were already beginning to lose faith in the possibility of a rate hike within the year after a slew of disappointing data from the U.S. came out, such as the relatively poor readings for the latest NFP report.

However, even more forex traders lost faith in a potential rate hike during the week ending on October 13 because of the FOMC meeting minutes. The minutes revealed that the decision to keep rates on hold was nearly unanimous since it was agreed that “although the U.S. economy had strengthened and labor underutilization had diminished, economic conditions did not warrant an increase in the target range for the federal funds rate.” In addition, the FOMC members also mentioned that downside risks to inflation and growth have increased.

Aside from the FOMC meeting minutes, another possible reason for the Greenback’s weakness was that forex traders were expecting U.S. headline CPI to sink lower from -0.1% to -0.2% for the month of September. Of course, we now know that it did precisely that.

All of the U.S. dollar’s forex rivals quickly took advantage of its weakness, with the only exception being the pound since the pound was reeling from the disappointment brought about by the latest MPC meeting minutes. Specifically, the minutes state that the strong pound “continued to depress import price growth and so CPI inflation,” and that “the near-term outlook for CPI inflation appeared slightly weaker than at the time of the August Inflation Report.”

And it looks like the MPC members were right since headline CPI for September was still close to zero when it took an unexpected trip into negative territory (-0.1% actual v.s. 0.0% expected, 0.0% previous), which sparked another round of pounding for the pound as forex traders began to doubt the timing of a potential Q1 2016 rate hike.

Moving on, the one currency that won out against the Greenback was the Kiwi. And, as Pip Diddy pointed out in his Top Forex Market Movers of the Week, RBNZ Governor Graeme Wheeler’s October 13 speech was taken by many forex traders as a hint that the RBNZ would probably not be cutting rates in their upcoming meeting, which pumped up demand for the Kiwi in the process. Moreover, forex traders were probably pretty happy with the latest dairy auction, which posted a 9.9% increase in dairy prices, marking the 4th consecutive session of increasing dairy prices.

Got any other conclusions you can draw from this latest COT Report? Feel free to share your thoughts in the comments section or if you’re looking for further discussion, community member ForExchange has a lively thread called Trading based on Market Sentiment in the forums awaiting your participation.